Thanks for that.
Having rolled around the ATO website for a while, I'm not convinced that the New Zealand IRD would have the capacity or capability to administer such a system.
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In the Netherlands it used to be that they also tax you for rental income even if you owned your own house freehold. So if your house could get rent of $500 per week over 52 weeks that’s $26,000 multiply that by whatever tax bracket you are in ie New Zealand 33% is the highest it would be $7,878 in tax you would need to pay from your home. They all tended to keep their mortgage high to offset this.
They love their taxes in Europe
Assets have to be sold or disposed of eventually - even if by the trustees/administrators of your estate. So there will be some lag before revenue is raised.
Income tax brackets should also be adjusted annually for bracket creep due to inflation and there should also be an inflation allowance for the income from fixed interest deposits and bonds.
Something like it....imputed rent on owner occupied housing (taking into account maintenance and rates etc costs). It made the party unelectable but many economists agree that it makes sense.
In NZ If you invest you money in a business you are taxed on the services, income and profit it produces (and maybe later also the Capital gains due to inflation and its success.) However if you invest your money in a house that provides you with a valuable service of providing accommodation it is tax exempt and the capital gains are also untaxed. So it is tax efficient, for those who can afford it, to invest your money in (non taxable income producing) owner occupied residential property.
This is why the TWG is also considering an alternative method, similar to FIF on foreign shares but applying to all shares.
In this CGT scenario, IRD tax would you 5% of your total share portfoilio value at the beginning of every tax year, regardless of your portfolio changes/transactions over that year.
Extrapolating from your example:
year 1 = $0 (assuming you had no share investments at start of y1),
year 2 = taxed on $50,000 ->$16,500 income tax to pay if you're on 33% tax rate
year 3 = taxed on $73,125 -> $24,131 income tax to pay if you're on 33% tax rate
year 4 = taxed on $146,250 -> $48,262 income tax to pay if you're on 33% tax rate
Would make share investment quite unattractive.
It would be a horrid choice: would create havoc with kiwisaver, an exodus of share investment by NZ'ers, reduction in companies listing in NZ, and an increase in consumer spending (why bother saving?).